Whistling Past the Credit Crunch

NYT DealBook, November 6, 2007
Small can be beautiful too.
The seizing up of the credit markets has led to a big decline in multibillion-dollar mergers and acquisitions. The drop has been most extreme in leveraged buyouts, which relied on cheap debt that all but disappeared, or at least became a lot more expensive. But at the smaller end of the deal spectrum, where transaction prices are in the hundreds of millions or even lower, and in certain regions of the world, such as Asia, it seems that life, and deals, go on.
M&A International, an alliance of 42 merger advisory and investment banking firms around the world, conducted a survey of its members in late September and early October. It asked these bankers, most of whom advise on deals with price tags below $250 million, about the fallout from the credit crunch.
The responses suggest that it has had only been a modest drag on transactions in the so-called middle market, made up of smaller deals that generally don’t make for splashy headlines.
Slightly more than half of the respondents said they hadn’t seen any effect on deal activity in their part of the market, M&A International said Tuesday in a summary of the survey.
Why wouldn’t smaller deals be feeling the pinch? One reason may be that private equity deals were never such a driving force to begin with in these kinds of transactions. In the words of one anonymous respondent: “Our deals are mid-sized to smallish and both our active and prospective deals involve strategic buyers who do not expect to encounter funding difficulties.”
M&A International also said that bankers in Asia generally reported feeling insulated from the turmoil in the United States credit markets — at least for now.
Go to M&A International’s Web Site »